From the brink of incredible success, the new German coalition is on the verge of driving Germany back towards an almost inevitable economic abyss…

Eurocrats love to opine about European competitiveness from their
lofty tax free towers. Yet the most competitive aspect of Europe
remains the race to be the genuine sick man of Europe. Britain
held the mantle unchallenged during the 1970’s until Margaret
Thatcher revitalised the nation’s fortunes in an unprecedented
reversal. Now the sick man of Europe mantle is hypercompetitive.
Greece, Spain, Italy and Cyprus are amongst a series of basket
case economies while France is on the cusp of a triple dip
recession thanks to a dizzying spiral of dismal government.

However, the idea that Germany, the all-powerful hegemon of
Europe, might itself biodegrade economically sounds preposterous
as we can easily bear witness to roads awash with an ocean of
Audis, BMWs, Mercedes and VWs. Nevertheless, the cycle is turning
and Germany is once again in danger of decline. Ironically
Germany was written off a decade ago, after a lavish but bruising
reunification process proved the folly of top down economics:
Eastern Germany remains economically patchy whereas Poland
without a western ‘sugar daddy’ is a remarkable economic
success story. Germany’s rise was thanks to the Social Democrats
(SPD) who, ironically, are proving pivotal in dragging Berlin
back down again. Hartz IV was a key development by Chancellor
Gerhard Schroeder, at once making Germany more dynamic and
igniting the incredible decade of growth that saw
“Mutti” Merkel hectoring the rest of the EU on the
virtues of fiscal prudence.

Alas the German electorate just didn’t quite love Mrs Merkel
enough, voting her a poisoned chalice in the recent general
election. Her third term is a coalition moving Germany left. One
key SPD demand? Watering down the Hartz employment laws which
they introduced! Swingeing rises in minimum wages won’t help
competitiveness, nor will higher taxes.

This economic paragon has obtained a complacent coalition just
when it must plan for the future. Mrs Merkel hectors abroad yet
appears aloof to the problems facing her homeland.

Demography is a big issue. Despite a lavish $265 billion annual
spend on family subsidies to encourage population growth, Germany
is aging (already the oldest in Europe with median age of 45).
Demographic studies are frightening: the German population could
plunge by 21% or 17 million people to 65 million by 2060. The
workforce is shrinking by 200,000 a year. Germany has fewer
people in work today than it had 20 years ago. Germans tend to be
guarded about immigrants - just when they need an influx.

The German state has a massive series of top down legacy projects
which allied with even a much more modest than predicted
population decline, can cause economic problems. German power
prices are 30% above the EU average and twice that of US rivals
(no wonder Daimler Benz are considering a new Mercedes factory
stateside).

Scaremongering about fracking is closing the shale spigot while
Mrs Merkel’s knee-jerk cowardice post Fukushima in closing down
all nuclear power plants will go down in history as concerted
energy suicide. Germany lavishes 700 billion - 1 trillion euro
subsidising erratic renewables which is, itself, er,
unsustainable. This green dream is every taxpayer’s worst
nightmare. Mrs Merkel is invariably the woman banging her
stiletto on the EU summit table demanding prudence, reciting her
triptych of welfare madness (Europe is 7% world population, 25%
of the global economy and 50% of Earth’s social spending). Yet,
Mrs Merkel herself is perilously close to ignoring her own golden
rules at home.

Despite a massive government bribe for births, Germany’s
demographics look shaky. An aging nation is discouraging
investment and employment while demanding fiscal rectitude from
eurozone neighbours. Ultimately Germany is slowing long-term.
Productivity growth has been barely 0.6 percent for a decade,
half the OECD rate. Right now Germany may appear the class of the
field in its own backyard but then again the 'Eurotrash'
economies are no match for their emerging competitors. Meanwhile
Germany cannot afford to bulk up its government sector when
holding together the euro vanity currency. It will soon require
hard cash on top of national bills for crazy green subsidies,
birth bonuses and a massive unfunded pension liability.

The German boom is close to its peak. It may soon be a sick man
although probably not the sick man amongst Europe’s fantasy
economies. However how can the EU itself survive a bout of German
influenza?

The statements, views and opinions expressed in this column are solely those of the author and do not necessarily represent those of RT.